Thursday, September 27, 2018

Oil approaches $82 as Iran sanctions continue to drive supply fears

Oil prices jump 1% as markets continue to prepare for the imposition of fresh sanctions on Iran by the US.

Concerns
about supply constraints likely to emerge once the new sanctions come
into place in November are driving the oil price higher right now.

Brent crude, the international benchmark, is at a high not seen since autumn 2014.

The price of oil is approaching $82 per barrel on Thursday
as investors continue to pour into the commodity ahead of the imposition
of fresh US sanctions against Iran, the world's fifth largest oil
producer.

Concerns about supply constraints likely to
emerge once the new sanctions come into place in November are driving
investors to buy into oil ahead of time, in turn pushing up prices.

"Oil prices remain in the bulls domain amid concern that US sanctions
on Iranian crude oil exports will result in much tighter physical market
conditions once they take effect in November," Stephen Innes, head of
trading for Asia at OANDA, said in an email. "While the US oil inventory
data counts, the fact that the markets could still be underestimating
the supply crunch from Iran sanction has many Oil investors running with
the bulls."

Oil prices are set to increase further in
the coming months, with JPMorgan last week arguing that Brent could
spike as high as $90 per barrel in the coming months.

"The main driver of this revision is a higher estimate of how much
Iranian crude exports might decline due to multi-country respect for US
sanctions that should come into effect on November 4th," JPMorgan said in a note on September 21.